Richard Levin, who assumed office in 1993, has served as Yale’s president in a period of remarkable economic prosperity. Now, as he outlined Tuesday in a 2,000-word letter to faculty and staff, he and his colleagues face the challenge of balancing ambitious new initiatives with the reality that Yale’s endowment is today worth three-quarters of what it was on June 30. Levin, who is also the Frederick William Beinecke Professor of Economics, spoke by phone to the News on Tuesday about the state of Yale’s finances.
Q: Looking back, what kind of steps has Yale taken up to this point in terms of preparing for and addressing the economic crisis?
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A: If we go back a year or two, we’ve tried to manage the rapid increase in the value of our endowment prudently. In the period of rapid growth that preceded last year, we’ve managed to accumulate substantial reserves that will help cushion any decline. And, in adjusting our spending rule last year — which we did in order to increase our commitment to financial aid — we also kept a certain amount of endowment returns undistributed. We can now spread those over the years ahead. So we’ve been conservative in recognizing that the enormous returns would not persist forever. That’s point one.
I guess the second point is that we’ve been an amazingly resilient institution. We have a very good sense of our highest priorities and we have great leadership across the campus. I believe all of our deans and directors are prepared to cope with making prudential choices in a period when resources are constrained. They’ve been terrific at expanding our institution when our resources were growing, and I think those same leadership qualities will serve Yale well in more difficult times.
Q: Do you regret that so many ambitious proposals are converging just as the economy is suffering?
A: Of course I regret that. It’s a lot more fun to be able to say yes to every good idea. We’ve been in a period … essentially we’ve been in a period of being able to support virtually every good idea that came along. That’s historically unprecedented and it was bound to be a finite amount of time where that prevailed. We’re going to do just fine — this is not the end of the world — but we’ll have to set priorities more carefully.
Q: If Yale’s financial situation gets much worse in the coming months or years, though, what further adjustments might you make?
A: I think there’s a lot more we can do. The measures we’ve taken today are not without pain, but there are clearly opportunities to — if we had to — to curtail expenses more. That said … you’d want to equalize on all the margins. If there are 10 different places to cut, you don’t want to cut one and not the other nine; you want to find the appropriate amount to cut each. Our endowment only passed the $17 billion mark a little less than three years ago. It’s not like this is a catastrophe.
Q: So there’s really no chance that, say, the new colleges or new SOM campus just won’t happen at all?
A: I really want those things to happen, and I’m going to do my best to raise the money and make it possible for them to move forward.
Q: What about Yale Tomorrow [the capital campaign]? Will it take longer to reach its goal, or might you revise it back down to the initial $3 billion target?
A: I feel pretty confident that we’ll make the goal of the campaign. Now the demands are such that we will want to do even more if we could.
Q: Len Baker ’64 [the chair of the Corporation finance committee] said today that Yale could possibly capitalize on these economic woes because of decreases in construction costs and investment opportunities. What’s your assessment of that possibility?
A: I think there’s a lot of validity in what he’s saying. We haven’t seen construction costs falling yet, but we’re going to watch that closely and respond accordingly. And I certainly think we will see tremendous opportunities for the endowment to make great investments down the line. This is where having someone with the acumen of David Swensen will serve us extraordinarily well.